Grant Thornton Australia joins Grant Thornton Advisors multinational platform. Read more.
By: Neil Jeans
26 Aug 2026 6 min read
Historically, that process was relatively straightforward.
However, latest expansion of US pressure on Iran, combined with China’s increasingly assertive use of its blocking and counter-sanctions laws, has introduced new complexity and risk. Companies may increasingly find themselves in a position where complying with one country’s sanctions creates legal risk in another.
Recently, the United States expanded its economic measures relating to Iran, signalling a broader approach to enforcement. US Treasury Secretary Scott Bessent has indicated that countries and companies continuing to do business with Iran may be exposed to secondary sanctions, with Washington’s focus now extending beyond traditional oil and financial restrictions to new areas including shipping, aviation, technology, gold and digital assets.
Secondary sanctions are particularly powerful because they do not simply regulate American companies. Their real force lies in requiring foreign companies to choose between continuing to do business with a sanctioned country or entity and maintaining access to the US financial system and markets.
For many international banks and multinational companies, the balance has historically favoured preserving access to US dollars, correspondent banking and American markets, given their importance to global operations.
China is now challenging that calculation. Over recent years, it has built a legal framework designed to resist foreign sanctions and other forms of extraterritorial economic pressure. That framework now includes the Unreliable Entity List, the Anti-Foreign Sanctions Law, the 2021 Blocking Rules and, more recently, regulations dealing with foreign extraterritorial jurisdiction and supply-chain security.
The important development is not simply that these laws exist. It is that China is increasingly prepared to use them, and that fundamentally changes the compliance equation.
China’s response to the latest US announcement has been direct. Beijing has rejected the threat of US secondary sanctions over its trade with Iran, describing unilateral sanctions as unlawful and warning that it will take all necessary measures to protect its rights and interests. That response is significant because it suggests China is not merely objecting diplomatically but is prepared to frame compliance with US measures as a potential challenge to Chinese legal and commercial interests.
This means sanctions decisions increasingly need to move beyond the screening team. Legal, sanctions, geopolitical risk, operations, supply-chain, country management and senior executives may all need to be involved.
Western companies have traditionally responded to sanctions uncertainty conservatively. If a transaction looks too difficult, the rational commercial decision may simply be not to proceed. That tendency has contributed to the longstanding problem of sanctions ‘over-compliance’. China’s approach could make that strategy considerably less attractive.
That means sanctions risk assessments will increasingly need to distinguish between what is actually prohibited, what creates secondary-sanctions exposure and what the company simply does not want to do. Those distinctions have always mattered. They may now carry legal consequences on both sides.
For Australian companies, the challenge is not only complying with Australian and UN sanctions, but also understanding where US secondary sanctions, Chinese countermeasures and positioning and contractual commitments may create competing obligations.
The practical challenge for organisations is no longer just whether a transaction triggers a sanctions alert. It is whether the organisation has the governance, legal analysis and escalation processes to make defensible decisions when sanctions regimes collide.
1. Map where sanctions laws conflict, not just where sanctions apply. Identify transactions, customers, subsidiaries and supply chains exposed simultaneously to US secondary sanctions and Chinese blocking or counter-sanctions measures. Also identify any nexus with Iran or Iranian-linked entities that could increase the risk of contravening US (and Australian and UN) sanctions.
2. Review contracts and exit clauses. Standard sanctions clauses that permit immediate termination following a US designation may create problems where Chinese law restricts compliance with that measure. Legal teams should review governing law, termination rights and sanctions wording.
3. Separate ‘prohibited’ from ‘high risk’. Document whether a transaction is illegal, creates secondary-sanctions exposure, or just sits outside the organisation’s risk appetite. That distinction becomes critical when another jurisdiction may challenge the decision to withdraw.
4. Build an escalation process for conflicting obligations. A sanctions screening alert should not automatically result in rejection. Cases involving China, Iran or competing sanctions regimes may need rapid escalation across sanctions, legal, geopolitical risk and senior management.
5. Stress-test the organisation for a genuine legal collision. Ask the uncomfortable question now: what would we do if the US required us to stop a relationship that Chinese authorities required us to continue? Establish who makes that decision, what information they need and which market exposure the organisation is ultimately prepared to put at risk.
Sanctions compliance is an evolving landscape, and organisations need to respond as regulatory expectations, geopolitical dynamics and enforcement priorities shift. This means having the right governance, escalation pathways and decision-making processes in place before issues arise so teams can act quickly and confidently. Please reach out to one our sanctions experts today if you’d like to discuss how this complex operating environment may impact your business.
Article contributed to by Claudine Lamond – Risk Consulting
Understanding changes to AML/CTF obligations and the Privacy Act: what reporting entities need to know.
From 1 July, the updated AML/CTF regime takes effect for Tranche 2 organisations including the real estate industry. There is already commentary, interpretation and subsequently confusion in the aged care market.
The AML/CTF Amendment Bill 2026 gives AUSTRAC new powers to restrict or prohibit the use of high‑risk mechanisms such as crypto ATMs by reporting entities.
